In this article, I am going to look at what happened when a renewable energy investment opportunity failed to work out for investors and the steps you can take to prevent this happening to you.
What was the investment proposition?
A UK registered company, UK Renewable Investments (AD) Plc (UKRI), needed capital to develop fifteen anaerobic digestion renewable energy plants in Northern Ireland.
The project was to be funded by selling corporate bonds to investors. Between July 2015 and September 2016, it raised £2.5 million from 208 investors.
The bonds had a fixed five-year term, proposed paying 11% per annum every six months from year two, and would be redeemed in full at the end of year five.
What happened next?
The plan was to lend £2.5 million to a separate company (Bio Green Energy Limited) who would then build fifteen separate anaerobic digestion plants. However, the construction of the plants was never completed.
Bio Green was placed into Administration in May 2017. As it could not repay its loan to UKRI, this in turn meant that UKRI could not repay its 208 investors (bondholders).
UKRI was therefore declared insolvent in April 2019.
Where’s the money gone?
While UKRI is insolvent, it is possible that there are 15 half-built energy plants sitting in a field in Northern Ireland that may have some value but it’s more likely that the money has been eaten up in ‘management charges’.
The liquidator is currently working through what happened and has yet to file a report.
What was the outcome for investors?
At the moment, there is no suggestion of any impropriety (investment fraud) as the case does not appear to have been referred to either the Financial Conduct Authority (FCA) or the Serious Fraud Office (SFO) for investigation.
Should the FCA get involved they will need to establish how the money was raised from investors. If an individual decided to invest on the basis of advice from a regulated financial adviser, then the investor may be eligible for compensation from the adviser.
However, should the adviser be unable to settle the claim then recourse may be available through the Financial Services Compensation Scheme (FSCS). Although the FSCS limits the compensation amount at £85,000.
What was the outcome for the promoters?
It would appear that the only ‘crime’ the directors have committed is a failure to keep proper books and records. The penalty usually means being disqualified from acting as directors. Management incompetence is not a crime.
How to deal with renewable energy investment opportunities
- As with any investment proposition, be very suspicious of being approached ‘out of the blue’ by phone, email or letter
- Fraudsters increasingly use social media ads and online testimonials to target victims so be alert to this tactic when clicking through to read more.
- Please remember that sustainable energy investment products are not regulated by the FCA. You will not be eligible for compensation under the FSCS should the investment fail.
- However, Collective Investment Schemes (CIS) where investors money is pooled together to purchase assets do require authorisation and will be regulated by the FCA.
- Check that the operator of the renewable energy investment scheme is authorised by the FCA.
- Check the FCA Register or call the FCA’s consumer helpline on 0800 111 6768 if you have any doubts.
- Be very suspicious of promoters offering unusually high returns (as a rule of thumb returns over 8% are probably too good to be true).
- If you do decide to go ahead and invest, always seek advice from an independent financial adviser regulated by the FCA before you transfer any money.
